GM is suspending some worker-benefit programs
General Motors Corp. is suspending a variety of benefit programs for its white-collar workers and slashing additional jobs to cut costs -- a move that comes as employers nationwide begin to review the cost of retirement and healthcare packages in an effort to ride out the economic downturn.
Cash-strapped GM, the largest of the Big Three Detroit automakers, plans to stop matching its nonunion employees’ contributions to their 401(k) retirement savings plans beginning Nov. 1, the company said in an e-mail sent to its U.S. executives Wednesday. The company usually matches contributions of up to 4% of an employee’s salary. On Jan. 1, the company also plans to shelve its scholarship program and its financial assistance for tuition and adoption.
Employee benefits have taken a hit as corporations across the country try to control their costs. In a recent survey of 248 companies by human resources consulting firm Watson Wyatt, 21% said they asked employees to pay a larger share of their healthcare premiums, 11% froze or closed pension plans and 2% reduced matching payments to 401(k) and 403(b) plans.
Such cutbacks are not uncommon in down times. In the wake of the dot-com bust, a number of employers, such as brokerage firm Charles Schwab, suspended its 401(k) matching contributions.
“Very few organizations go down that path if they can help it,” said Shub Debgupta, a senior researcher at Corporate Executive Board.
GM has struggled more than most big corporations in the downturn, a victim of falling sales and tight credit markets. Without specifying numbers, the automaker told employees that layoffs were likely later this year and in early 2009. The cuts come after a company offer to buy out some of its 9,000 salaried employees.
“The global credit crisis has had a dramatic impact upon the industry at large, and new vehicle markets in North America and Western Europe have contracted severely,” Chief Executive Rick Wagoner and President Fritz Henderson said in a letter. “The global economic outlook remains very concerning.”
GM is not the only automaker suffering. Chrysler said Thursday that it would cut 1,825 jobs as it shuts a Delaware plant a year ahead of schedule and slashes output at an Ohio facility.
Mounting worries about the troubled auto industry prompted members of the Michigan congressional delegation to send a letter Thursday to Treasury Secretary Henry M. Paulson and Federal Reserve Board Chairman Ben S. Bernanke, asking them to “use their broad regulatory authority” to “promote liquidity in the U.S. auto industry.”
“They need to do for autos what they’re doing for the mortgage industry,” Sen. Carl M. Levin (D-Mich.) said.
Vehicle sales have hit a 15-year low. Although a $25-billion loan program to aid the domestic auto industry was rushed through Congress, it could take more than a year to infuse this money into Detroit.
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